Nowadays, the use of cryptocurrencies has increased significantly. However, because this technology is particularly complex in its usage, it also entails considerable risks, leading to various scams that have caused users to lose substantial amounts of money.
How can Blockchain Investigation Help?
Blockchain investigation can assist in:
- Uncovering criminal networks
- Cryptocurrency thefts
- Cryptocurrency-related scams
- Scams involving MLM (multi-level marketing) or Ponzi schemes
- NFT thefts
- Forex frauds
What is Cryptocurrency Forensics and Asset Tracing?
Cryptocurrency forensics and asset tracing on the Blockchain are investigative methods used to track financial transactions conducted using cryptocurrencies. These methods are employed to identify perpetrators and locate assets associated with any Blockchain.
Bitcoin and cryptocurrency tracing is part of the investigation and recovery process for victims of online fraud, digital currency or NFT theft, hacking, and extortion. These investigations support dispute resolution and financial recovery through civil lawsuits, criminal prosecutions, and regulatory enforcement actions.
Our lab conducts cryptocurrency forensic investigations for law firms, investors, exchanges, regulators, and law enforcement agencies. Each investigation is led by a Cryptocurrency Tracing Certified Examiner (CTCE) and/or a Certified Fraud Examiner (CFE).
How Can Transactions and Amounts Be Tracked on the Bitcoin Blockchain and Other Cryptocurrencies?
Many people believe that cryptocurrencies are entirely anonymous. Transactions for Bitcoin and other virtual currencies are publicly recorded on online blockchain ledgers, identifying users solely by their cryptocurrency address—a long string of letters and numbers—without names, locations, or other personal identification details.
Law enforcement, regulators, and financial investigators have developed innovative methods to penetrate this veil of anonymity. Blockchain intelligence tools and investigative techniques, including analyses like Common Spend Analysis and Address Reuse Analysis, can be used under certain conditions to de-anonymize cryptocurrency transactions. In response to increased scrutiny and monitoring, cybercriminals have refined money-laundering methods, such as layering, and adopted new technologies to enhance their anonymity.
Information from external sources can be sought by law enforcement agencies through their foreign counterparts using judicial letters. All associated addresses—and any identified bank accounts via subpoena—can be included in court orders for seizure, forfeiture, or confiscation.
What Kind of Information Can Be Tracked?
The dual goals of cryptocurrency forensics and asset tracing—identifying the perpetrator and locating their funds—are pursued through various areas of analysis and evidence gathering:
- Attribution Data: Blockchain intelligence tools collect and analyze ownership attribution information for thousands of entities, which can be used to de-anonymize blockchain addresses to identify criminals and subjects under investigation. These systems rarely provide personal identification information (PII) for individual owners of specific cryptocurrency assets but may identify known associations with criminal groups or fraud schemes, as well as transactions with other relevant entities, such as exchanges and fiat on-ramps where proceeds from criminal activities are converted to cash.
- Transaction Mapping: Transaction data is transformed into visual maps and flow charts, showing the subject’s interactions with known exchanges and other entities, tracing financial transfers to their endpoints. Visual mapping makes pattern recognition much easier. Expert investigators use powerful tools that automate mapping and evidence collection. This approach is more effective than blockchain search engines or open-source explorers that require manual verification of ledger entries.
- Cluster Analysis: Clustering involves a group of cryptocurrency addresses controlled by the same person or entity. Expanding the focus of an investigation from one address to a larger cluster can dramatically increase the volume of available evidence for de-anonymization and asset tracing.
- Subpoena Targets: Cryptocurrency exchanges, decentralized finance (DeFi) companies, and virtual asset service providers that comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations typically require customer identity verification for new accounts. This makes them highly valuable resources for de-anonymizing subjects who have used their services to buy, exchange, hold, or cash out cryptocurrencies. Personal identifying information for registered address and wallet holders—as well as their banking details—may be obtained through civil subpoenas or criminal warrants.
- Current/Historical Value: Cryptocurrency addresses with significant value are critical indicators for financial recovery. They may be suitable targets for seizure warrants by criminal prosecutors or for garnishment in the execution of a civil court judgment.
- IP Addresses: In some cases, it is possible to identify the IP address of the subject under investigation if they use specific providers.
